5 Stocks Poised for Big Breakouts

Delafield, Wis. ( Stockpickr) -- Trading stocks that trigger major breakouts can lead to massive profits. Once a stock trends to a new high, or takes out a prior overhead resistance point, then it's free to find new buyers and momentum players that can ultimately push the stock significantly higher.

Breakout candidates are something that I tweet about on a daily basis. I frequently tweet out high-probability setups, breakout plays and stocks that are acting technically bullish. These are the stocks that often go on to make monster moves to the upside. What's great about breakout trading is that you focus on trend, price and volume. You don't have to concern yourself with anything else. The charts do all the talking.

Trading breakouts is not a new game on Wall Street. This strategy has been mastered by legendary traders such as William O'Neal, Stan Weinstein and Nicolas Darvas. These pros know that once a stock starts to break out above past resistance levels, and hold above those breakout prices, then it can easily trend significantly higher.

One name that's starting to move within range of triggering a near-term breakout trade is Youku Tudou ( YOKU), which is an Internet television company in China. This stock is off to a decent start in 2013, with shares up just over 19%.

If you take a look at the chart for Youku Tudou, you'll notice that this stock is spiking higher today right above its 50-day moving average of $19.80 with heavy upside volume. At last check, over 2.44 million shares have traded for YOKU, which is well above its three-month average volume of 1.85 million shares. This stock has also started to break out above some near-term overhead resistance levels at $20.58 to $20.95 a share. That move is quickly pushing the stock within range of triggering another major breakout trade.

Traders should now look for long-biased trades in YOKU if it manages to break out above some near-term overhead resistance levels at $21.79 to $22.60 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 1.85 million shares. If that breakout triggers soon, then YOKU will set up to re-test or possibly take out its 52-week high at $25.24 a share. Any high-volume move above that level will then give YOKU a chance to tag $30 to $33 a share.

Traders can look to buy YOKU off any weakness to anticipate that breakout and simply use a stop that sits just below its 50-day at $19.80 or right below its 200-day at $19.21 a share. One could also buy YOKU off strength once it takes out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Kandi Technologies

Another stock that looks poised to trigger a near-term breakout trade is Kandi Technologies ( KNDI), which is engaged in designing, developing, manufacturing, and commercializing all-terrain vehicles (ATVs), go-karts, and specialized automobiles, such as electric vehicles (EVs) for the People Republic of China and global markets. This stock is off to a hot start in 2013, with shares up 33%.

If you take a look at the chart for Kandi Technologies, you'll notice that this stock recently formed a double bottom chart pattern at $4.42 to $4.41 a share. Since marking that bottom, shares of KNDI have surged higher and broke back above its 50-day moving average at $5.23 a share. That move is quickly pushing shares of KNDI within range of triggering a near-term breakout trade that could lead to a super spike higher for the stock.

Traders should now look for long-biased trades in KNDI if it manages to break out above some near-term overhead resistance levels at $5.25 to $5.67 a share high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 1.99 million shares. If that breakout triggers soon, then KNDI will set up to re-test or possibly take out its next major overhead resistance levels at $6.50 to $7.18 a share. Any high-volume move above those levels will then put its 52-week high at $8.50 into range for shares of KNDI.

Make note that this stock is spiking sharply higher today by over 10% to $5.38 a share with heavy upside volume. At last check, volume has already registered over 3.46 million shares, which is well above its three-month average action of 1.99 million shares.

Traders can look to buy KNDI off any weakness to anticipate that breakout and simply use a stop that sits right below its 200-day at $4.29 a share. One could also buy KNDI off strength once it takes out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Keep in mind that KNDI has a decent amount of shorts involved in the name, since the current short interest as a percentage of the float for the stock is 6.9%. If that breakout triggers soon, then we could easily see a sharp short-covering rally, so make sure to keep this name on your breakout trading radar.

Nam Tai Electronics

One name that's quickly moving within range of triggering a big breakout trade is Nam Tai Electronics (NTE) ( NTE), which, is an electronics manufacturing and design services provider to a select group of the world's leading OEMs of telecommunications and consumer electronic products. This stock has been hammered by the bears so far in 2013, with shares off sharply by 42%.

If you look at the chart for Nam Tai Electronics, you'll notice that this stock has been uptrending strong for the last month, with shares marching higher from its low of $5.55 to its intraday high of $7.97 a share. During that move, shares of NTE have been consistently making higher lows and higher highs, which is bullish technical price action. This uptrending is coming after a severe downtrend for shares of NTE, which took the stock sharply lower from $13.95 to that recent low of $5.55 a share. Shares of NTE are now quickly moving within range of triggering a major breakout trade.

Traders should now look for long-biased trades in NTE if it manages to break out above some near-term overhead resistance levels at $8.08 to $8.62 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 696,471 shares. If that breakout triggers soon, then NTE will set up to re-fill some of its previous gap down zone from April that started near $12 a share. This stock could even potentially hit $13 to $14 a share if that gap gets filled with strong volume.

Traders can look to buy NTE off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day at $6.77 a share, or right below more near-term support at $6.55 a share. One can also buy NTE off strength once it takes out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Keep in mind that NTE is set to report earnings on Monday, August 5, 2013 before the market opens. Look to play this breakout ahead of the quarter for a decent run into that gap, and then after the quarter for a much bigger move if the stock reacts positively to the numbers.

Responsys

Another stock that's starting to trend within range of triggering a near-term breakout trade is Responsys (MKTG) ( MKTG), which is a provider of email and cross-channel marketing solutions that enable companies to engage in relationship-based marketing across the interactive channels. This stock has been on fire so far in 2013, with shares up a whopping 141%.

If you look at the chart for Responsys, you'll notice that this stock has been consolidating and trending sideways for the last two months, with shares moving between $12.50 on the downside and $15.10 on the upside. Shares of MKTG have just started to bounce sharply higher off some near-term support at $13.31 a share with decent volume. That move is quickly pushing shares of MKTG within range of triggering a breakout trade above the upper-end of its sideways trading chart pattern.

Traders should now look for long-biased trades in MKTG if it manages to break out above some near-term overhead resistance levels at $14.56 to its 52-week high at $15.10 a share volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 360,843 shares. If that breakout triggers soon, then MKTG will set up to enter new 52-week high territory, which is bullish technical price action. Some possible upside targets off that breakout are $17 to its all-time high of $18.19 a share. Any high-volume move above $18.19 will then give MKTG a chance to tag or trend north of $20 a share.

Traders can look to buy MKTG off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $13.31 to $13.24 a share, or right below more support at its 50-day of $12.47 a share. One can also buy MKTG off strength once it takes out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Keep in mind that MKTG is set to report earnings on Monday, August 5, 2013 after the market close. I would look to play that breakout ahead of the quarter for a run to $17 to $18, and then after the quarter for a run north of $20 if the stock reacts positively the numbers.

Lone Pine Resources

My final breakout trading candidate is Lone Pine Resources (LPR) ( LPR), which is an oil and gas exploration, development, and production company. This stock has been destroyed by the bears so far in 2013, with shares down sharply by 60%.

If you look at the chart for Lone Pine Resources, you'll notice that this stock has recently come out of a big downtrend, which took shares from $1.34 to its recent low of 26 cents per share. After hitting that low at 26 cents, this stock has reversed its downtrend and started to uptrend, with LPR moving higher to its recent high of 59 cents per share. During that reversal, shares of LPR have been seeing strong upside volume flows, which is bullish. That move is quickly pushing shares of LPR within range of triggering a major breakout trade.

Traders should now look for long-biased trades in LPR if it manages to break out above some near-term overhead resistance levels at its 50-day moving average of 54 cents per share and then once it takes out more key resistance levels at 57 cents to 59 cents per share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 854,221 shares. If that breakout triggers soon, then LPR will set up to re-test or possibly take out its next major overhead resistance levels at 70 cents to 90 cents per share. This stock could even tag its 200-day at $1.02 or more resistance at $1.05 to $1.10 a share.

Traders can look to buy LPR off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at 46 cents to 44 cents per share. One could also buy LPR off strength once it clears those breakout levels with volume and then simply use a stop that sits a conformable percentage from your entry point.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.